Cost of Subsidizing Fossil Fuels Is High, but Cutting Them Is Tough

Attributed Authors:
James Kanter
Published:
Oct
2011

...Moreover, citizens and companies that rely on fossil fuels usually do not pay the full cost of resulting environmental problems like oil spills, sludge from coal mines and greenhouse gases, and for health problems from polluted air.

Estimates of the cost of these effects — or “externalities” in the ungainly jargon of economists — vary.

One study published in August in The American Economic Review and written by economists from Yale University in Connecticut and Middlebury College in Vermont found that air pollution from coal-fired power plants cost the United States more in health damage than those plants contributed to the U.S. economy.

Yet another form of implicit subsidy identified by environmentalists and by some economists is the benefits that flow to another form of low-carbon power — nuclear energy.

Electricity ratepayers and taxpayers have long helped to shoulder the costs of constructing reactors, uranium enrichment and waste management, according to these experts. Citizens also implicitly have covered the costs of any major accident, because utility companies would never be able to pay for the damage themselves, they said.

Since the disaster at the Fukushima Daiichi plant in Japan in March, when an earthquake and tsunami wrecked reactors and released dangerous contaminants, it has become even clearer that current levels of private insurance are inadequate, said Doug Koplow, the founder of Earth Track, a group that studies global energy subsidies.

Mr. Koplow pointed out that liability estimates for the Japanese disaster were between $47 billion and $130 billion, and that Japanese taxpayers would pay most of that.

Despite exhortations of international officials, supports for fossil fuels seem unlikely to disappear any time soon.